Economy

Domino's sticking to growth plan despite sales pressures

Domino's sticking to growth plan despite sales pressures”

Competitors such as Pizza Hut and Papa John's have partnered with outside delivery networks but Domino's is "betting that [the third-party] business model, which involves luring customers with free delivery and deep discounts, is not sustainable", CNBC said.

Global same-store sales growth also slowed, rising 1.7%, the 103rd-straight quarter of same-store sales growth. Argus dropped their price target on shares of Domino's Pizza from $310.00 to $280.00 and set a buy rating for the company in a research note on Wednesday, July 17th.

Net store growth is still expected to increase between 6% and 8% over the next two to three years.

"It is an evolving competitive and operating environment" in the U.S., CEO Ritch Allison said on the company's third-quarter earnings call on Tuesday.

CFO Jeff Lawrence said on an earnings call that the pizza delivery giant would repurchase $1 billion shares, bringing total buybacks over the past three years to almost $3 billion. It also lowered its same-store sales forecasts for both the USA and global businesses. GuruFocus estimates the stock has tumbled 5% year to date. Domino's Pizza had a negative return on equity of 12.81% and a net margin of 10.83%.

But executives this year have also acknowledged that third-party delivery services have played a role in the softening results of late. He also said that the company's fortressing strategy will continue to put pressure on same-store sales in the coming years.

Revenue break-up: U.S. Company-owned stores: $94.58M (-20.2%); U.S. franchise royalties and fees: $97.05M (+8.5%); Supply chain: $485.11M (+9%); worldwide franchise royalties and fees: $54.59M (+8.3%); U.S. franchise advertising: $89.49M (+8.5%). Carryout now represents 45% of the company's sales, and Allison noted that the carryout segment overall is "significantly larger than the delivery segment".

But there was sales growth, including 1.7% company-owned same-store sales and 2.5% in franchise same store sales. It now expects USA same-store sales growth in a range of 2% to 5%, down from a prior range of 3% to 6%.

Domino's on Tuesday reported $820.8 million in revenue for its fiscal third quarter ended September 8, up about 4% compared with past year but weaker than predictions from Wall Street analysts, according to FactSet.



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